On behalf of the Board of Directors of Petrol One Resources Berhad (“PETONE” or “Company”), we are pleased to present the Annual Report 2018, the Audited Financial Statements for the financial year ended 30 June 2018 (“FY2018”) and the management discussion and analysis of financial condition and results of operations of PETONE Group (the Company and its subsidiaries) (“MDA”).
FY2018 was a challenging year for the oil and gas (“O&G”) industry and for the Group. However, the O&G midstream sector appears to have entered an expansion phase, as many the experts consider that the outlook for the marine transportation and support services as well as for onshore storage services are expected to be positive moving forward, which bodes well for the business strategy of PETONE Group.
PETONE ventured into the O&G industry in 2008. Headquartered in Kuala Lumpur, Malaysia, PETONE is one of South East Asia’s Independent O&G storage and offshore support services companies. The Company’s core commercial activities include the storage of oil and its derivative products such as fuel oil and petrochemicals, among others both, both in onshore facilities, and in floating storage units; oil terminal support services; leasing and operating standby safety vessels for rig support, and ship-to-ship (“STS”) transfer operations.
The Group’s business strategy continues to focus on the market for marine transportation and support services in Malaysia. The prolonged depression in world oil prices has spurred the demand for storage and bulk liquid trading logistical support in the downstream and trading markets and therefore, the Group continues to concentrate on the provision of surveyor services in relation to STS transfer operations for oil products stored on floating storage units (“FSUs”) which are chartered/owned via its indirect subsidiary company, One Petroleum (L) Ltd (“OPLL”) on behalf of its customers, and located in the region of Johor Darul Takzim.
STS transfer operations are complex and entail both comprehensive and critical sets of procedures that must be carefully executed in accordance with international conventions, particularly on the safety of life at sea and the prevention of pollution caused by sea-going vessels. In instances where vessel owners do not have the resources and/or the experience to perform such assignments in an efficient manner, market players with the relevant technical expertise and long-term experience, such as the PETONE Group, may be engaged to coordinate and facilitate the STS transfer operations.
Leveraging on similar skill sets with that of STS operations the Group through a subsidiary company, Petrol One Storage Sdn. Bhd. (“POSSB”) continues in the current financial year, to manage an oil storage facility with a capacity of approximately 220,400 cubic meters located at Pelabuhan Klang, Selangor. The contract requires the POSSB team to manage the day to day operations of the storage facility, coordinating in the loading and unloading of storage product(s) i.e. ship-to-land and vice versa and most importantly meeting the expectations of the products and the storage facility owners.
The Group continues the provision of safety standby vessel (“SSV”) services on a time charter basis through another of its subsidiaries. SSV services are complementary to the Group’s existing business, leveraging on the Group’s long-term experience in vessel operations. The Group will continue to work diligently to expand in this area of operations notwithstanding the announcement by Petronas to curtail its capital and operating costs as the Group is of the view that the demand for offshore support vessel (“OSV”) remains resilient due to the tightening of the Cabotage Policy that favours Malaysian flagged vessels.
2018 was a year of weak financial performance. Revenues were flat but impairment on receivables and impairment on fixed asset impacted the profit for the year negatively.
The Group’s key risks management encompasses major business and financial areas as follow:
Although mitigation or control processes are designed to manage the key risks identified, there can be no assurance that the risks will not materially affect the business of PETONE Group or the industry as a whole. On-going self-monitoring and evaluation of the Group’s risk profile and internal control system are crucial to align the risks and our business objectives.
The Company had been classified as an ‘affected listed issuer’ pursuant to Paragraph 2.1(a) of the Practice Note 17 (“PN17”) under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) on 30 August 2012. The PN17 criterion was triggered as a result of the shareholders’ equity of PETONE Group on a consolidated basis falling below 25% of the Company’s issued and paid-up capital, which was less than RM40,000,000.
Since then, our plan to regularise the business and financial condition of the Group was structured and updated to be in-lined with the Group’s development. On 27 July 2017, modifications to the Proposed Regularisation Plan was done after taking into consideration the consent judgement recorded by the Court of Appeal on 24 March 2016 in relation to the orders allowed by the High Court pursuant to an application made by one of the Scheme Creditors and provisions such as the abolishment of par value regime and consequently the concept of authorised share capital under the Companies Act 2016 (“CA2016”) which had come into effect on 31 January 2017. The Company’s Principal Adviser, Public Investment Bank Berhad (“PIVB”) had announced on behalf of the Board of the revision of the Proposed Regularisation Plan now comprising:
a) Proposed capital reduction of the share capital of PETONE pursuant to Sections 115(a) and 116 of the
(b) Proposed private placement of 200,000,000 Placement Shares to identified investors at an issue price of RM0.10 per Placement Shares after the completion of Proposed Capital Reduction,
(c) Proposed renounceable rights issue of up to 501,609,690 new Rights Shares together with up to 376,207,267 Warrants at an issue price of RM0.10 per Rights Share on the basis of 2 Rights Shares for every 1 existing PETONE share held, together with 3 Warrants for every 4 Rights Shares subscribed after the completion of the Proposed Private Placement,
(d) Proposed settlement of the amounts owing to the unsecured credits of PETONE and its subsidiaries amounting to approximately RM121,959,700 as at 30 September 2013
The Board later announced on 10 August 2018 the Company was unable to fully secure suitable placees for the entire tranche of the Placement Shares, despite numerous efforts from the Company to actively engage and source for suitable placees. Nevertheless, the Board has later on 20 August 2018 submitted an Appeal to Bursa to seek extension of time and is pleased to inform shareholders that on 3 October 2018, Bursa has approved the Company’s appeal with certain conditions. The Board will take every effort to complete the said Regularisation Plan.
Notwithstanding the stabilisation of operation environment of the Global O&G industry and signs of recovery of the oil prices, the O&G industry in Malaysia nonetheless remains challenging. Some of these challenges are: revival of O&G projects remain slow, recovery of contract prices to its previous height remained to be seen and charter rates of vessels at its all-time low. The Group is inevitably affected by these factors. Having said that, we believe that the Group’s team of staff and its unique skill set allowed the Group to continue do reasonably well under the circumstances.
We will continue in reviewing our business strategy to focus on what we do best and where we can to outpace competitors. The emphasis for O&G industry for the region remained on a cost cutting mode and we will be continuously looking for growth areas where we our strength lies and leveraging on our asset and cost light business model.
From operational point of view, the Group will continue in servicing its current contracts, phasing out unprofitable ones and to continue to identify other opportunities. For business investment, we will channel funding into the areas of growth that best promote our differentiating capabilities and into businesses that are sustainable.
Save for the on-going Proposed Regularisation Plan, the Company did not undertake any other corporate proposal to raise proceeds during the FY2018.
The Company does not have any material contracts (not being contracts entered into in the ordinary course of business) involving Directors’ and Major Shareholders’ interest, either still subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year.
The Company and/or its subsidiaries do not hold any property.
The Company did not seek shareholders’ mandate for RRPT in the preceding Annual General Meeting.
Lastly, we would like to express our sincere gratitude and appreciation to all shareholders for their continued support and confidence in the Group. Our appreciation also goes to all the professionals that supported the Group during its trying times and to the management team and employees for their unwavering contributions, commitment and dedication to achieving the results of the Group for the FY2018.
For and on behalf of
the Board of Petrol One Resources Berhad
Peter Thomas Phelan
Senior Independent Non-Executive Chairman
Date : 31th October 2018
Azlan Shairi Bin Asidin
Executive Director cum Chief Executive Officer
Date : 31th October 2018